Asia Pacific Regional Headquarters:Singapore on Top, but
Competition to Increase

Asia Pacific is forecast to increase its share of global GDP from
31% in 2015 to 36% in 2030

Singapore, Hong Kong and Shanghai are the region’s core RHQ
locations

Singapore leads the group, benefiting from lower costs, favorable
business environment and being strategically located in the region

Development of industry specific hubs will allow companies to
diversify their geographic location

Continued development in the region will see ASEAN countries
increase in prominence and the RHQ model evolve to become more
divisional and locational focused

April 07, 2016 07:10 AM Eastern Daylight Time

SHANGHAI--(BUSINESS WIRE)--Singapore remains the most attractive Asia Pacific destination for
multi-national companies (MNCs) to set up their regional headquarters
(RHQs), but competition is expected to intensify according to a report
released today by DTZ/Cushman & Wakefield, a global leader in commercial
real estate services.

The report notes, that Asia Pacific is forecast to increase its share of
Global GDP from 31% in 2015 to 36% in 2030. As businesses continue to
seek locations that are close to their target growth markets, the number
of RHQs located in Asia Pacific is therefore expected to increase.

Dr Dominic Brown, Head of Australia and New Zealand Research and
co-author of the report commented: “Economic growth in Asia Pacific will
propel multi-national companies into the region. This growth is based
upon the rise of the middle class in the region, growth in the
Technology, Media and Telecommunications (TMT) sector as well as
economic growth in ASEAN.”

The analysis shows that all of the six cities covered – Singapore, Hong
Kong, Shanghai, Sydney, Tokyo and Beijing – have their positive, and
negative, aspects, but that on balance Singapore comes out on top. While
Sydney and Tokyo are established RHQ destinations, their location on the
geographic periphery of the Asia Pacific region counts against them
both. However, recent depreciation of their respective currencies has
resulted in a reduction in costs, which acts in their favor. Beijing has
seen costs rise including cost of acquiring land as well increasing
employment costs. As the political center of China, Beijing has its fair
share of state-owned enterprises, however it is also quite
entrepreneurial. Beijing is the country’s single largest hub of both
mature TMT industries and incubator for related start-ups.

Considering the top 3, Shanghai which placed third, has been the great
improver – increasing from just 53 RHQs in 2003 to 470 in 2014 at an
average annual growth rate of 21% per annum. Direct access into China
has been the main propulsion behind the rise of Shanghai, though it has
also been aided by its diverse economic base, access to local talent and
that it is the commercial heart of China. However the rising cost of
land and cost of leasing prime properties are concerns, as are rising
salaries and mounting local business competition.

Singapore and Hong Kong took the top two places respectively. Both are
well established locations for RHQs and have longstanding favorable
economic and regulatory environments that are designed to attract
companies. However, Hong Kong faces a higher cost of living and
increasing competition from Tier 1 Chinese cities.

In addition, Hong Kong has regularly been near the top of the most
expensive office locations around the world in which to rent space,
normally placing behind London and New York. Indeed, on a per square
meter basis, Hong Kong is practically twice as expensive as Shanghai and
Singapore. The differences are further increased on a per workstation
measure, with Hong Kong having the worst space efficiency of the three
markets. In contrast, not only is Singapore the most space efficient
market of the top three but as a result of rental decline in 2015, it is
the cheapest on both a per square meter and per workstation basis.

Singapore, Hong Kong and Shanghai will need to evolve to continue to
attract and accommodate RHQs. The Hong Kong Government has made
extensive efforts to address office shortages such as through
decentralization to Kowloon East and Kowloon West. Similarly the
Singaporean Government is encouraging development of space outside of
the CBD in areas such as Jurong Gateway, Changi Business Park and Paya
Lebar Central. Shanghai has no shortage of space, which acts as a
positive. New industry hubs are being developed to aid the city’s
development, for example the West Bank Media Port.

David Jones, Head of Asia Pacific Client Coverage and Solutions, noted:
“Companies can reduce occupancy costs through increasing space
efficiency as well as moving into decentralized areas. Core CBD
locations in general are expensive and have limited vacancy. For those
companies that do not need to be in the CBD, industry specific hubs can
offer agglomerations of scale, a cheaper price point and the potential
for the development of a bespoke office solution.”

In addition, the RHQ model itself is also changing and adapting to
economic development in the region. In recognition of the economic
diversity in the region, many companies are now progressing from the
“one size fits all” approach to a “multi-nodal” approach. These
strategic nodes are either developed through aiming to have a
significant presence in each of the region’s major markets or by
locating individual business units in their most relevant market.

Dominic Brown added: “As the region continues to develop and advance,
opportunities in emerging markets will begin to appear. For example, the
rise and improving maturity of ASEAN economies is likely to offer
substantial opportunities, not least because occupancy costs per
workstation in Bangkok and Kuala Lumpur are less than a third of those
in Singapore.”

Ultimately, Asia Pacific will remain a key region for MNCs which will
continue to drive the need for space. Singapore, Hong Kong and Shanghai
are the strongest all round performers. However, no individual city can
offer a company everything that it needs, especially if that company has
a diverse array of business units and requirements. Rather we expect to
see smaller RHQs set up and for there to be numerous divisional
headquarters across the region taking advantage of each city’s
strengths. This plays to the rise of emerging markets. However, in all
instances an in depth understanding of each city across the political,
economic, demographic and real estate landscape is required, in order to
maximize any opportunities that are presented.

About DTZ/Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that
helps clients transform the way people work, shop and live. The firm’s
43,000 employees in more than 60 countries provide deep local and global
insights that create significant value for occupiers and investors
around the world. In Greater China, the firm has a co-branded presence
under the name of DTZ/Cushman & Wakefield and operates 20 offices in the
region. Cushman & Wakefield is among the largest commercial real estate
services firms with revenues of US$5 billion across core services of
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